Friday, October 31, 2008

Surviving through lean times - Part 2

Having talked about how to cope with possible recessionary fallout by trimming expenses and boosting income in order to boost savings, here I'm going to share about how to prepare myself psychologically for it. I believe the psychology part of preparing for the recession could be much more important than just the material aspects. This is because the mind will cause us to feel about the same thing differently at different times. You know what I mean, sometimes bad news feel like the end of the world, sometimes bad news feel like a mosquito bite.

I think it's important to feel upbeat about the whole thing. Easier said than done of course. I know some people who had invested in the stock market and are facing huge losses. This makes them worried and everything seems all gloom and doom. Having been through a bout of depression last year for losing 30k (most are realised, some paper losses) I think I can understand how it feels. You'll feel that Death is upon you because of all the suicidal thoughts that creep into your mind, especially at night when there are no routine work to occupy your mind anymore. I'll just look at the windows and think what it's like to fall down and end it all. Relationships got strained pretty badly too as it's apparent that I'm radiating negative energy and pessimism outwards. If you feel that way, please please do seek professional help. Depression is not a joke and it's not fun, neither is it incurable.

Time took care of a lot of things and I became better over a period of 1-2 months. I personally did not seek medical help because I'm confident I'll survive through it. I'm pro life and not someone to end my life prematurely. Again, do take note I'm just sharing my experiences. For those who are in depression, do seek the proper help.




I realised that life is more than just your investment, and it takes 1-2 months of depression to learn that! So what if you lose 30k? You can earn it back in 2 years. If not, 3 yrs or 4 years. I start to value the little things in life. What matters is that you do not overleverage yourself in the process. It's a different story altogether if I had borrowed 20k out of the 30k, lost all my 10k and still owe someone 20k! Or if I had lost 30k, and I had no buffer to pay for my tuition fee or housing loans and such. That will really sting! Thus the big idea here is: Do not overleverage yourself, because when the tide comes in, everything floats and rise, but when the tide goes out, you might be left with nothing but a mountain of debts.

Personally, I feel that keeping 3-5 months of expenses in savings account of banks is good enough for me. That's because of the nature of my job. I won't be suddenly called in and get retrenched, hence my buffer zone can be smaller. But I think this kind of buffer, you have to think about how long it'll take from the time you get retrenched to the time you eventually got a job - that's the amount of expenses in months you need to get in ultra safe places. These are the untouchables. I think by locking up this piece of my assets, I'll get piece of mind.

It's very important to find a support network too. I understand that like stocks, our moods go up and down in cycles too. If you have a group of your most loyal fans (start looking at your significant other, than to your friends and family), who will stay on with you through thick and thin, through prosperity and sickness, I think you'll never feel down. It's like when you're down, you'll cheer them up, and vice versa. Call it mutual backscratching, but it works!

If you can't find a network, about how my cbox? I'll cheer you up, but make sure when I'm feeling gloomy, cheer me up too :)

(Suggested background music for reading this post: Try Louis Armstrong's version of La Vie En Rose here)

4 comments :

Sgbluechip said...

Hi LP, I am also sitting very heavy losses in the market, close to 6 digits. But still, I am confident we can ride this out. Take this as an opportunity to know yourself better and tolerance towards risk and returns.

I am still comfortable holding SPH, Singpost, Keppel etc, as the businesses generate good yields and have a competitive moat to leverage on.

Hence, fret not, bad times will end, good times will reign.

Cheers!

Createwealth8888 said...

Brolp,

It is all in the investor's mind that drop in stock price can make him goes crazy.

Ask the investor, does valuation drop in his home, car, gold, etc make him go crazy. Probably, no, then why drop in stock price can be so much different. Oh, maybe company can go bankrupt, but home can be burnt down, car and gold can be stolen.

Think positively and treat stock as the same as home, car, gold, then one will be alright.

PC said...

LP,

I lost a whopping S$120K of my hard-earned life-savings in CLOB shares during the '97 Asia Financial Crisis. That was the highest tution fees I've ever paid to the stock market since I started my stock investment journey 3 decades ago.

Having gone thru those tough times; I swore to myself that "I would be back."

And I learned my mistakes the hard way...

Now in year 2008, I'm still a happy-go-lucky retail investor, though I'm ten years older. ^_^

蚕蛹破茧成蝶,凤凰涅重生。
Cán yǒng pò jiǎn chéng dié, fèng huáng niè chóng shēng
– A silkworm penetrates its cocoon to change into a beautiful butterfly; a phoenix is still alive, after regeneration.

la papillion said...

Hi guys,

Thks for sharing your story with me as well :) It seems like everyone got to learn the hard lessons by paying some tuition money to the market. I believe after paying, there are only two outcomes - one is that you learn a good deal out of it and emerge better, the other is that you still make the same and have to quit the market, never to return.

I think i'll take the former anytime :) Huat!